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BWFS

3023
ACCOUNTING AND AUDITING ORGANIZATION
FOR ISLAMIC FINANCIAL INSTITUTIONS ( AAOIFI )
AAOIFI formerly known as Financial Accounting Organization for Islamic
Bank and Financial Institutions.
AAOIFI is an Islamic international autonomous non-for-profit corporate body
that prepares accounting, auditing, governance, ethics and Shari'a standards for
Islamic financial institutions and the industry
Established in accordance with the Agreement of Association which was signed
by Islamic financial institutions on 1 Safar, 1410H corresponding to 26 February,
1990 in Algiers
Registered on 11 Ramadan 1411 corresponding to 27 March, 1991 in the State
of Bahrain.
Responsible for formulation, issuance of finance standards and developing
new standards and also reviewing existing standards
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supported by institutional members including
central banks,Islamic financial institutions, and other
participants from the international Islamic banking
and finance industry, worldwide.
gained assuring support for the implementation of
its standards, which are now adopted in the
Kingdom of Bahrain, Dubai International Financial
Centre, Jordan, Lebanon, Qatar, Sudan and Syria
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The relevant authorities in Australia, Indonesia,
Malaysia, Pakistan, Kingdom of Saudi Arabia, and South
Africa have issued guidelines that are based on AAOIFIs
standards and pronouncements.
to support technical application of standards, AAOIFI
offers the following professional qualifications programs.
Certified Islamic Professional Accountants (CIPA)
Certified Shariaa Adviser and Auditor (CSAA)
MISSION
Standardization and harmonization of international
Islamic finance practices and financial reporting in
accordance to Shariah

VISION
To guide Islamic financial markets operation and
financial reporting on Shariah principle and rules.
To provide Islamic financial markets with a
standard that can support growth of the industry.
To develop accounting and auditing thoughts relevant to
Islamic Financial Institutions

To disseminate accounting and auditing thoughts relevant to


Islamic Financial Institutions and its applications through training,
seminar, publication of periodical newsletters, carrying out and
commissioning of research and other means
To prepare, promulgate and interpret accounting and
auditing standards for Islamic Financial Institutions

To review and amend accounting and auditing standards for


Islamic Financial Institutions
The Malaysian Accounting Standards Board (MASB) is established
under the Financial Reporting Act 1997 (the Act)

Act as independent authority to develop and issue accounting and


financial reporting standards in Malaysia.

Make up the frameworks for financial reporting in Malaysia together


with the Financial Reporting Foundation (FRF).

These frameworks comprises an independent standard-setting


structure with representation from all relevant parties in the standard-
setting process, including preparers, users, regulators and the
accountancy profession
MISSION OF MASB
In a wider context, the
Develop and promote high quality accounting and MASB seeks to
reporting standards that are consistent with contribute directly to
international best practices for the benefit of users, the international
preparers, auditors and the public in Malaysia. development of
financial reporting for
the benefit of users,
preparers and auditors
of financial reports.
- Develop high quality, clear and enforceable national
accounting standards for financial reporting that benefit users.

- Bring about harmonisation of national accounting standards


with international accounting standards

- Promote the use and application of those standards by way of


communication with and education of users, preparers,
auditors and the public

-Activelly contribute to the development of accounting


Of MASB standards internationally, including, Islamic-based accounting
standards

- Promote and support research in the area of financial


reporting, in particular, for emerging markets and Islamic
markets.
FUNCTION AND POWER OF MASB

Issue new accounting standards as approved accounting standards and to


review, revise or adopt existing accounting standards as approved
accounting standards;
Issue statements of principles for financial reporting;
Sponsor or undertake development of possible accounting standards;
Conduct public consultation as necessary;
Develop a conceptual framework for the purpose of evaluating proposed
accounting standards;
Make such changes to proposed accounting standards as considered
necessary;
Seek the view of the FRF in relation to new and existing standards,
statement of principles, and changes to proposed standards;
Determine scope and application of accounting standards; and
Perform such other function as the Minister of Finance may prescribe
Problem arise in MASB
- Lack of Shariah consistency as each bank relied on shariah
advisors of respective banks.
- This lack of comparability and consistency on the accounting
treatment on recognition, measurement and disclosure of Islamic-
based transactions.
- Causing the measurement and comparison of financial performance
of the banks are difficult to make.
- So, MASB aim to develop Malaysian accounting standard or
technical releases for Islamic financial institutions.
- Section known as MASB FRSi-1 (from 2003- 2010) then only serve
as Technical Realese or TRi-3 (from 2010 onward).
Comparison on structural objectives

A. Differences on COVERAGE of standards

IFRS AAOIFI

For entire economic and Specific for Islamic finance


social activities. industry.
Generic, mostly not Based on requirement of
industry-specific. Islamic finance practices.
B. Differences on TYPES of standards

IFRS AAOIFI

Type-specific. All-encompassing.
Accounting. Accounting,
Shariah,
Auditing, Ethics, and
Governance.
AAOIFI standards issued
for specific Islamic banking
and finance practices not
covered by IFRS / IASB
standards.
AAOIFI standards issued IFRS / IASB standards that
because IFRS / IASB can be adopted by IFIs
standards cannot be (therefore AAOIFI does not
adopted in whole by issue similar ones and
Islamic financial allows adoption of those
institutions (IFIs). standards).

Categories of
accounting
standards for IFIs
Categories of accounting standards for IFIs

1. AAOIFI standards issued because IFRS / IASB


standards cannot be adopted in whole by IFIs

Due to Shariah compliance issues or because IFRS /


IASB standards do not fully cover characteristics of
Islamic banking and finance.

In these cases, AAOIFI standards are issued to apply to


topics covered by the IFRS / IASB standards.

Eg.: AAOIFIs FAS 1 (General Presentation and


Disclosure in Financial Statements of IFIs) covers IAS 1
(Presentation), 7 (Cash Flow), 18 (Revenue), etc.
2. AAOIFI standards issued for specific Islamic
banking and finance practices not covered by
IFRS / IASB standards

For financial transactions and practices


unique to Islamic banking and finance.

In these cases, AAOIFI standards are issued


to apply to topics not covered by IFRS / IASB
standards.

Eg.: AAOIFIs FAS 2 (Murabaha & Murabaha


to the Purchase Orderer), FAS 7 (Salam &
Parallel Salam).
3. IFRS / IASB standards that can be adopted by IFIs
These standards do not give rise to Shariah
compliance issues and are adequate to cover
practices of IFIs. In these cases, AAOIFI does not
issue equivalent standards

IFIs adopting AAOIFI standards are allowed to also


follow other standards if there are no equivalent
AAOIFI standards.

Eg.: IAS 10 (Events after Balance Sheet Dates),


IAS 24 (Related Party Disclosures).
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